Economy of Scale in Apartment Investing
Whenever a large number of rental units are located at the same address, even under one roof in many cases, there is an "economy of scale" in the operation and management of the units. Since services and other expense items can be better controlled, and there can be contracts and cost negotiations for volume, costs per unit are reduced, and this increases cash flow per unit.
Apartment Financing in Apartment Investing
Apartment financing, or multifamily financing and mortgages, is not treated the same as getting a mortgage on a single family rental property. Lenders look at credit scores and other income primarily in single family rental property lending. But, cash flow is the primary consideration in apartment financing and multifamily mortgage applications. Investors are frequently surprised that they can get apartment financing on 50 or more units as easily as trying to purchase several residential homes for less in total loan amount.
More real estate investors should look into apartment investing, as they can greatly multiply their cash flow and return on investment with units concentrated in one location and economy of scale.
